I'm confused over my mortgage policy
Published 09/11/2012 | 05:00
I took out a policy with my original mortgage which promised to pay off the loan in the event that I died or became unwell and couldn't work. I hear that these policies are no longer valid and that I might get a premium refund. To be honest, I'd prefer to keep the policy if it pays out. How can I check?
There are two types of policy which may be causing confusion. Firstly,mortgage protection is life cover.
It pays out if you die before the mortgage is paid off. The bank gets repaid by the life insurance company and your family wouldn't have the worry of the mortgage or have to sell the house.
Mortgage protection is usually mandatory with all mortgages and is also essential.
It is sometimes sold in conjunction with "Serious Illness cover" which makes the pay out if you suffer from cancer, stroke or another life limiting illness.
A different type of policy is Payment Protection Insurance, or PPI. These policies have come under scrutiny because many of them were sold to people who could not possibly have made a claim.
The Central Bank has now ordered an investigation into all providers of these policies to check if they can continue to be honoured, or make a premium refund if not.
They generally "take over" your mortgage payments for a limited period, say a year, if you are ill and cannot work, or made unemployed.
They are also used to cover car loans, credit cards etc. They are not mandatory, and are very expensive.
There's nothing inherently wrong with them, but I've never been a fan myself.
They are notoriously difficult to claim on and will not be honoured for the self-employed, contract workers or homemakers.
To check what you have, look at the policy itself.
If it's not clear, contact your bank and ask them. If you believe you have PPI and you qualify for it, and are happy to keep it, that's fine.
If it's mortgage protection, you must retain this as is.
My mortgage is with Ulster Bank since 2008 and I've had a problem getting proper mortgage interest tax relief. I understand they are remedying this now -- can you explain what I have to do?
Banks are obliged to make taxation adjustments at source on qualifying mortgage payments.
In the last budget, the minister announced higher interest reliefs for buyers who bought at the height of the boom -- from 20pc to 30pc.
These are worth up to €166 per month to customers.
Ulster Bank, partly due to the IT glitch last summer, has been unable to apply these deductions in full, meaning mortgage customers have not been receiving the full benefit.
Instead, it has been applying an 'interim rate' of 25pc.
They appear to have sorted this out now and will have to backdate the payments.
It means that a lump sum of up to €996 will be deducted off the qualifying mortgages to rebalance them.
This should be done by the end of December this year and the correct rate applied for 2013.
So you shouldn't have to do anything. Let's hope the minister doesn't make any further changes in his December Budget speech!